The Australian Dollar corrects after weak economic data from Australia. Retail sales and construction figures for May both fell short of expectations. This disappointed investors and triggered a correction in the Australian dollar. As a result, AUD/USD retreated from its year-to-date high near 0.6600. However, the correction was completed as the US dollar continues to remain under selling pressure. The chart below shows that retail Sales in Australia increased by 3.30% in May 2025 compared to the same month in the previous year.
Moreover, the US Dollar rebounds from key support levels as the Dollar Index enters oversold territory. Technical indicators suggest that selling pressure may have reached a point of exhaustion. This has prompted a short-term recovery in the greenback.
Stronger-than-expected economic data from the United States also supports the rebound. Job openings surprised to the upside, indicating ongoing strength in the labor market. At the same time, manufacturing activity showed signs of improvement, easing concerns about a broader economic slowdown.
These positive data points have helped restore confidence in the US economy. As a result, traders scaled back some of their bearish positions on the US Dollar. The combination of technical oversold signals and firm economic fundamentals triggered renewed buying interest in the currency. However, the broader trend in the US Dollar Index remains strongly bearish, and this rebound may be limited, potentially leading to another sharp decline in the US Dollar.
Federal Reserve Chair Jerome Powell maintained a cautious tone in his latest comments. He emphasized the need to assess the inflationary effects of Trump’s tariffs before deciding on rate cuts. This wait-and-see approach keeps markets uncertain about the timing of future monetary easing. Traders now look ahead to upcoming US employment data for further clues.
Market liquidity in the US remains solid. The Chicago Fed National Financial Conditions Index dropped to -0.51, signaling loose financial conditions. This suggests the broader financial environment continues to support economic activity.
Meanwhile, the Fed’s balance sheet runoff has slowed to $23 billion in June 2025, which also adds to liquidity.
The 4-hour chart for AUD/USD shows that the price is consolidating within an ascending broadening wedge pattern. Strong bearish pressure on the US Dollar Index has led to a notable bullish move in the AUD/USD exchange rate. However, strong resistance is seen near the 0.6650 level, marked by a long-term trendline shown in black. A break above 0.6650 would signal further upside potential. As long as the pair remains above 0.6400, the overall trend is likely to stay bullish.
The 4-hour chart for NZD/USD shows that the pair is trading within the 0.5850 to 0.6090 range. Strong price action near the 0.5850 level suggests bullish momentum and indicates a potential breakout above 0.6090. A break above this level would likely trigger a strong move to the upside. The presence of multiple rounding bottoms near 0.5850 further supports the likelihood of continued upward movement.
The 4-hour chart for USD/JPY shows that the pair is consolidating within a tight range between the 142 and 148.30 levels. This consolidation zone is highlighted in orange on the chart below. A break above the 151 level would signal a strong move to the upside. Conversely, a break below 142 could push the pair toward the 140 zone. The 140 level serves as long-term support, and a break below it may lead to a deeper decline. The prolonged consolidation within this range reflects heightened price uncertainty, as the pair awaits its next directional move.
Muhammad Umair is a finance MBA and engineering PhD. As a seasoned financial analyst specializing in currencies and precious metals, he combines his multidisciplinary academic background to deliver a data-driven, contrarian perspective. As founder of Gold Predictors, he leads a team providing advanced market analytics, quantitative research, and refined precious metals trading strategies.
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